Witnesses Weigh In On Group Health Tax Treatment

The head of an employer group warned here against rewriting federal income tax laws in a way that discourages employers from offering health insurance.

Andrew Webber, president of the National Business Coalition on Health, spoke here at a House Education and Labor Committee subcommittee hearing on ways to help the uninsured through employee benefit programs.

The committee’s Health, Education, Labor and Pensions Subcommittee organized the hearing in the wake of Bush administration proposals to replace the current unlimited group health tax exclusion with a deduction that would be available to everyone with health coverage. The Bush proposal would, in effect, cap the deduction at $7,500 per individual and $15,000 per family.

“The overall issue of a standardized tax deduction for the purchase of health care is worthy of open debate in Congress,” Webber said, according to a written version of his remarks. “Leveling the federal tax playing field in terms of a standard deduction for everyone could be an effective strategy to help individuals that purchase coverage on their own.”

The current group health tax break is especially unfair to self-employed consumers, Webber said.

But the NBCH “is skeptical of efforts to contain escalating costs…by making the purchase of health insurance over a certain amount … taxable income,” Webber said. “Essentially, such a strategy could weaken the foundation of the employer-based system, particularly since the current system already is shifting significant costs onto employees through copayments, deductibles and various geographic based inequities.”

Another witness, Linda Blumberg, who spoke for the Urban Institute, Washington, said lawmakers should adopt 4 key principles when trying to increase the number of insured individuals:

1. Subsidize insurance benefits for lower-income individuals.